Jury convicts ex-Silicon Valley hedge fund manager of fraud

A former Silicon Valley hedge fund manager was convicted Wednesday of defrauding local investors out of millions of dollars by luring them with bogus promises of backing from prominent law firms and auditors.

After a few hours of deliberation, a San Jose federal jury convicted Albert Ke-Jung Hu of seven counts of wire fraud for his role in what prosecutors called a brazen scam during closing arguments earlier in the day. Federal prosecutors alleged during the two-week trial that Hu's scheme was "a facade he fabricated to lure victim-investors to invest in his funds."

Federal law enforcement officials arrested Hu in Hong Kong in early 2009, charging him with orchestrating the fraud over a seven-year period through several Sunnyvale-based hedge funds. Court papers show investors may have lost as much as $5 million.

Prosecutors said Hu enlisted well-heeled clients by assuring them his hedge funds, Asenqua Beta Fund and Fireside LS Fund, were affiliated with reputable lawyers, auditors and others, promising investors returns of 20 to 30 percent. They said Hu used the money for himself, diverted funds to overseas accounts and skipped the country to avoid capture.

Hu, who has remained in custody since his arrest, did not testify at trial. But Jerry Fong, Hu's lawyer, told the jury that while he may have lied to potential investors, the falsehoods were not "material" to their decision to entrust their money to him and thus there was no criminal wrongdoing.

In a pending related civil case, the U.S. Securities and Exchange Commission has accused the hedge fund manager of securities fraud violations.

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U.S. District Judge Ronald Whyte is expected to sentence Hu later this year, and he could spend five years or more in federal prison.

Howard Mintz covers legal affairs. Contact him at 408-286-0236 or follow him at Twitter.com/hmintz